Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Stoxx Europe Small 200 Price Eur / Technical Analysis

With further consolidation likely for the broad indexes, we want to stick with areas of the market that have shown an ability to outperform despite the broader consolidation. For that we are returning to Technology and Services. Roughly half of today’s individual stock recommendations are domiciled in Japan, while the remainder hail from India and Russia.

With further consolidation likely for the broad indexes, we want to stick with areas of the market that have shown an ability to outperform despite the broader consolidation. For that we are returning to Technology and Services. Roughly half of today’s individual stock recommendations are domiciled in Japan, while the remainder hail from India and Russia.

Global Equity Strategy U.S. Fed Cut, Now What?

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/001/original/2019-07-13_16-16-31.png?1563002212" class="editor-image img-responsive" data-smartkarma-image-id="93001"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/005/original/2019-07-13_16-25-24.png?1563002742" class="editor-image img-responsive" data-smartkarma-image-id="93005"></figure>Source: Japan Analytics
</div>MOVING AVERAGE BREAKOUT - Japanese equities have now risen by 5.1% since the low of 4th June and, since July 1st, the Total Market Value has exceeded the 50-Day Moving Average for the first time since 26th April. Over the last two weeks, the Total Market Value has gained 1.7% in both Yen and US dollar times. For the previous twelve months, the equity market has moved in line with the US dollar/Japanese Yen exchange rate. It remains to be seen how the 'gap' that has opened up in the last month will be closed. Any further strength in the Yen from current levels will likely see the market slip below the 50-Day Moving Average again.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/020/original/2019-07-14_06-28-16.png?1563053334" class="editor-image img-responsive" data-smartkarma-image-id="93020"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/024/original/2019-07-14_06-45-29.png?1563054338" class="editor-image img-responsive" data-smartkarma-image-id="93024"></figure> Source: Japan Analytics</div>VALUE TRADED RATIO - The Value Traded Ratio (Value Traded/Total Market Value) has seen two new eighteen-month lows. If the three days around Christmas are excluded, the current apathy towards Japanese equities is the most extreme since 2012 and is confirmed by recent BAML investor surveys. In the past, such periods of inactivity (marked"▲"above)  have preceded changes in market direction, more often upwards rather than downwards and suggest the current rally has more 'legs'. <div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/025/original/2019-07-14_06-47-40.png?1563054585" class="editor-image img-responsive" data-smartkarma-image-id="93025"></figure> Source: Japan Analytics</div>TORAKU INDEX - Conversely, the Toraku advance/decline index is suggesting a degree of caution having breached the 120 'overbought' line for only the third time in eighteen months. Combining this analysis with the Value Traded Ratio, there is scope for a short-term upward move akin to that of October 2018 to be followed by a sharper downward trend into the autumn.  <div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/026/original/2019-07-14_06-54-51.png?1563054906" class="editor-image img-responsive" data-smartkarma-image-id="93026"></figure> Source: Japan Analytics</div>VOLUME SCORE TIMELINE - The lull in market turnover is confirmed in the greener 'bias' in our Sector volume timeline. The Retail and Restaurant Sectors are hot as we are in the middle of the quarterly results announcements for February/May/August/November year-end companies. REITs remain the 'go-to' defensive Sector while the Information Technology and Internet Sectors are the 'tema-du-jour' - to mix language metaphors. The 'untouchables' are Metals, Banks, UtilitiesTransportation,  and Multi-Industry.<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/028/original/2019-07-14_07-31-40.png?1563057109" class="editor-image img-responsive" data-smartkarma-image-id="93028"></figure> Source: Japan Analytics</div>3-MONTH SECTOR CONTRIBUTION - Over the last three months, a long Telcos/short Autos strategy would have yielded 82 basis points of performance. The Retail Sector has responded well to the results released so far led by drugstores <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia (3141 JP)</a> and <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha (3391 JP), </a><a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a><a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">, and </a><a href="https://www.smartkarma.com/entities/lawson-inc" target="_blank" data-smartkarma-citation="entities:1040:1" rel="noopener">Lawson (2651 JP)</a>. Electrical Equipment has suffered from weakness in component stocks <a href="https://www.smartkarma.com/entities/alps-alpine-co-ltd" target="_blank" data-smartkarma-citation="entities:12001:1" rel="noopener">Alps Alpine (6770 JP)</a> (-38% over one year), <a href="https://www.smartkarma.com/entities/murata-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:11649:1" rel="noopener">Murata (6981 JP)</a> (see <a href="https://www.smartkarma.com/profiles/scott-foster" target="_blank" data-smartkarma-citation="accounts:1134" rel="noopener">Scott Foster</a>'s <a href="https://www.smartkarma.com/insights/murata-mfg-6981-jp-buy-on-decline-for-the-long-term" target="_blank" data-smartkarma-citation="insights:30919" rel="noopener">(Buy on Decline for the Long Term</a>), and <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" data-smartkarma-citation="entities:9924:1" rel="noopener">Taiyo Yuden (6976 JP)</a>, while <a href="https://www.smartkarma.com/entities/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC (6273 JP)</a>, <a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc (6954 JP)</a>, and <a href="https://www.smartkarma.com/entities/komatsu-ltd" target="_blank" data-smartkarma-citation="entities:8416:1" rel="noopener">Komatsu (6301 JP)</a> have weighed on the Machinery Sector.<div class="content-caption">
<figure class="editor-figure mceNonEditable"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/031/original/2019-07-14_07-44-47.png?1563057897" class="editor-image img-responsive" data-smartkarma-image-id="93031"></figure></figure> Source: Japan Analytics</div>SECTOR SCORE MATRIX - Arranging our cap-weighted Sector Relative Price Scores and Results &amp; Revisions Scores in a four-quadrant matrix whose extremes are Contrarian Sell, Contrarian Buy, Unrequited Growth, and Ex-Growth suggest profit-taking in Information Technology (<a href="https://www.smartkarma.com/entities/obic-co-ltd" target="_blank" data-smartkarma-citation="entities:1273:1" rel="noopener">OBIC (4684 JP)</a>, Other Commerical Products (<a href="https://www.smartkarma.com/entities/hoya-corp" target="_blank" data-smartkarma-citation="entities:8990:1" rel="noopener">Hoya Corp (7741 JP)</a>, and Commercial Services (<a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit 6098 JP).</a> We are not contrarian enough to fall into the banking 'trap', however, the Metals Sector may offer some 'crumbs' of comfort for those in need of a deep value 'fix' (<a href="https://www.smartkarma.com/entities/nippon-steel-sumitomo-metal-corp" target="_blank" data-smartkarma-citation="entities:961:1" rel="noopener">Nippon Steel &amp; Sumitomo Metal (5401 JP)</a>) <div class="content-highlight">In the DETAIL section below, we will review Sector performance, scores and valuation in more detail, as well as Company Results &amp; Revisions and individual stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia (3141 JP)</a>, <a href="https://www.smartkarma.com/entities/daiseki-co-ltd" target="_blank" data-smartkarma-citation="entities:2330:1" rel="noopener">Daiseki (9793 JP), </a><a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP), </a><a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis (4927 JP)</a>, <a href="https://www.smartkarma.com/entities/sekisui-house-ltd" target="_blank" data-smartkarma-citation="entities:4508:1" rel="noopener">Sekisui House (1928 JP)</a>, <a href="https://www.smartkarma.com/entities/keyence-corp" target="_blank" data-smartkarma-citation="entities:3077:1" rel="noopener">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a>, and <a href="https://www.smartkarma.com/entities/obic-co-ltd" target="_blank" data-smartkarma-citation="entities:1273:1" rel="noopener">Obic (4684 JP)</a>.</div>


Source: Japan Analytics
MOVING AVERAGE BREAKOUT - Japanese equities have now risen by 5.1% since the low of 4th June and, since July 1st, the Total Market Value has exceeded the 50-Day Moving Average for the first time since 26th April. Over the last two weeks, the Total Market Value has gained 1.7% in both Yen and US dollar times. For the previous twelve months, the equity market has moved in line with the US dollar/Japanese Yen exchange rate. It remains to be seen how the 'gap' that has opened up in the last month will be closed. Any further strength in the Yen from current levels will likely see the market slip below the 50-Day Moving Average again.
 Source: Japan AnalyticsVALUE TRADED RATIO - The Value Traded Ratio (Value Traded/Total Market Value) has seen two new eighteen-month lows. If the three days around Christmas are excluded, the current apathy towards Japanese equities is the most extreme since 2012 and is confirmed by recent BAML investor surveys. In the past, such periods of inactivity (marked"▲"above)  have preceded changes in market direction, more often upwards rather than downwards and suggest the current rally has more 'legs'. 
 Source: Japan AnalyticsTORAKU INDEX - Conversely, the Toraku advance/decline index is suggesting a degree of caution having breached the 120 'overbought' line for only the third time in eighteen months. Combining this analysis with the Value Traded Ratio, there is scope for a short-term upward move akin to that of October 2018 to be followed by a sharper downward trend into the autumn.  
 Source: Japan AnalyticsVOLUME SCORE TIMELINE - The lull in market turnover is confirmed in the greener 'bias' in our Sector volume timeline. The Retail and Restaurant Sectors are hot as we are in the middle of the quarterly results announcements for February/May/August/November year-end companies. REITs remain the 'go-to' defensive Sector while the Information Technology and Internet Sectors are the 'tema-du-jour' - to mix language metaphors. The 'untouchables' are Metals, Banks, UtilitiesTransportation,  and Multi-Industry.
 Source: Japan Analytics3-MONTH SECTOR CONTRIBUTION - Over the last three months, a long Telcos/short Autos strategy would have yielded 82 basis points of performance. The Retail Sector has responded well to the results released so far led by drugstores Welcia (3141 JP) and Tsuruha (3391 JP), Fast Retailing (9983 JP), and Lawson (2651 JP). Electrical Equipment has suffered from weakness in component stocks Alps Alpine (6770 JP) (-38% over one year), Murata (6981 JP) (see Scott Foster's (Buy on Decline for the Long Term), and Taiyo Yuden (6976 JP), while SMC (6273 JP), Fanuc (6954 JP), and Komatsu (6301 JP) have weighed on the Machinery Sector.
 Source: Japan AnalyticsSECTOR SCORE MATRIX - Arranging our cap-weighted Sector Relative Price Scores and Results &amp; Revisions Scores in a four-quadrant matrix whose extremes are Contrarian Sell, Contrarian Buy, Unrequited Growth, and Ex-Growth suggest profit-taking in Information Technology (OBIC (4684 JP), Other Commerical Products (Hoya Corp (7741 JP), and Commercial Services (Recruit 6098 JP). We are not contrarian enough to fall into the banking 'trap', however, the Metals Sector may offer some 'crumbs' of comfort for those in need of a deep value 'fix' (Nippon Steel &amp; Sumitomo Metal (5401 JP)) In the DETAIL section below, we will review Sector performance, scores and valuation in more detail, as well as Company Results &amp; Revisions and individual stock performance over the previous two weeks, as well as adding some brief comments on Welcia (3141 JP), Daiseki (9793 JP), Yaskawa Electric (6506 JP), Pola Orbis (4927 JP), Sekisui House (1928 JP), Keyence (6861 JP), Japan Post Insurance (7181 JP), and Obic (4684 JP).

🇯🇵 JAPAN • Market Update - Levitating on Thin Air

• RELATIVE PRICE SCORE •The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company data is cap-weight-aggregated into 328 Peer Group and 30 Sector Relative Price Scores. Outlier thresholds are set at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors. These thresholds equate with the top and bottom first-to-second percentiles of historical observations from which mean reversion normally takes only a few months.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/089/981/original/2019-06-10_17-53-34.png?1560156828" class="editor-image img-responsive" data-smartkarma-image-id="89981"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/089/982/original/2019-06-10_17-58-02.png?1560157092" class="editor-image img-responsive" data-smartkarma-image-id="89982"></figure>Source: Japan Analytics
</div>OUTLIER TRENDS - In the past, increases in the percentage of companies that are either Overbought or Oversold has been a useful indicator of market trends with a rising number of Overbought outliers being bullish and an increasing number of Oversold outliers being bearish and the crossovers between the numbers of each offering market timing signals.  TECH BUBBLE PLAYBOOK - The current situation where both sets of outliers are rising has only occurred once before in the last 30 years - in 1999/2000 shortly before the peak of the 'tech bubble'. We attribute some of the market's distortions to the Bank of Japan's market activities and the increase in algorithmic trading. Whatever the cause, repeating the 2000 tech bubble playbook is unlikely to end well. NEGATIVE 'SPREADS' - On a daily closing basis, the Oversold outlier percentage is currently 3.31%, having peaked at 3.51% on 17th May. The Overbought outlier percentage peaked at 2.52% on 27th May and is now at 2.37%. The negative 'spread' is currently -0.94%, having reached -1.22% on 14th May compared to -1.34 on December 25th 2018, and -1.26 on 29th January. In this distorted and polarised market, the winners keep on winning, and the losers keep on losing.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/089/985/original/2019-06-10_18-46-51.png?1560160026" class="editor-image img-responsive" data-smartkarma-image-id="89985"></figure><div class="content-caption">Source: Japan Analytics</div>MARKET TIMING - Using the crossover from Net Overbought to Net Oversold as a market timing indicator over the last two decades has produced reasonably good results.  The most recent monthly closing signal was generated in January when the total market value was ¥634t, 1.9% above the current level.<hr>• SECTORS •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/089/987/original/2019-06-10_19-30-41.png?1560162668" class="editor-image img-responsive" data-smartkarma-image-id="89987"></figure><div class="content-caption">Source: Japan Analytics</div>SECTOR 28-YEAR TIMELINE - The 28-year Sector Relative Price Score Timeline chronicles the periodic extremes of both Overbought and Oversold Sectors. Only seventeen Sectors have been Overbought during this period for a total of 546 months of which half were before 2001. The average Overbought persistence is 4.3 months or 3.4 months excluding the Internet Sector.  Only fourteen Sectors have been Oversold since 1992 for a total of 243 months of which 55% were before 2001. The average Oversold persistence is 5.7 months although this has risen to 7.5 months since 2001. Currently, five Sectors are Overbought - Consumer Services, Information Technology, Healthcare Other Consumer Products, and Healthcare -  and two Sectors are Oversold - Banks and Utilities.    <div class="content-highlight">In the DETAIL section below, we provide an update on recent Sector and Peer Group trends and make some specific recommendations. A second Insight will follow looking at the Relative Price Scores for Companies. </div>

• RELATIVE PRICE SCORE •The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company data is cap-weight-aggregated into 328 Peer Group and 30 Sector Relative Price Scores. Outlier thresholds are set at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors. These thresholds equate with the top and bottom first-to-second percentiles of historical observations from which mean reversion normally takes only a few months.
Source: Japan Analytics
OUTLIER TRENDS - In the past, increases in the percentage of companies that are either Overbought or Oversold has been a useful indicator of market trends with a rising number of Overbought outliers being bullish and an increasing number of Oversold outliers being bearish and the crossovers between the numbers of each offering market timing signals.  TECH BUBBLE PLAYBOOK - The current situation where both sets of outliers are rising has only occurred once before in the last 30 years - in 1999/2000 shortly before the peak of the 'tech bubble'. We attribute some of the market's distortions to the Bank of Japan's market activities and the increase in algorithmic trading. Whatever the cause, repeating the 2000 tech bubble playbook is unlikely to end well. NEGATIVE 'SPREADS' - On a daily closing basis, the Oversold outlier percentage is currently 3.31%, having peaked at 3.51% on 17th May. The Overbought outlier percentage peaked at 2.52% on 27th May and is now at 2.37%. The negative 'spread' is currently -0.94%, having reached -1.22% on 14th May compared to -1.34 on December 25th 2018, and -1.26 on 29th January. In this distorted and polarised market, the winners keep on winning, and the losers keep on losing.  Source: Japan AnalyticsMARKET TIMING - Using the crossover from Net Overbought to Net Oversold as a market timing indicator over the last two decades has produced reasonably good results.  The most recent monthly closing signal was generated in January when the total market value was ¥634t, 1.9% above the current level.• SECTORS •Source: Japan AnalyticsSECTOR 28-YEAR TIMELINE - The 28-year Sector Relative Price Score Timeline chronicles the periodic extremes of both Overbought and Oversold Sectors. Only seventeen Sectors have been Overbought during this period for a total of 546 months of which half were before 2001. The average Overbought persistence is 4.3 months or 3.4 months excluding the Internet Sector.  Only fourteen Sectors have been Oversold since 1992 for a total of 243 months of which 55% were before 2001. The average Oversold persistence is 5.7 months although this has risen to 7.5 months since 2001. Currently, five Sectors are Overbought - Consumer Services, Information Technology, Healthcare Other Consumer Products, and Healthcare -  and two Sectors are Oversold - Banks and Utilities.    In the DETAIL section below, we provide an update on recent Sector and Peer Group trends and make some specific recommendations. A second Insight will follow looking at the Relative Price Scores for Companies. 

🇯🇵 Japan • June Relative Price Scores: Market, Sectors & Peer Groups - More of The Same

Our international Human Resources &amp; Employment Services Groups are showing signs of price and RS bottoms throughout Japan, Europe, and the UK. We believe short-term pullbacks in the names highlighted today should be bought, particularly in light of the Fed hinting at increased flexibility and the potential for improving trade headlines. Today we highlight our favorite setups within our int’l HR &amp; Employment Services Groups: Recruit Holdings Co., Ltd. (6098-JP), PERSOL HOLDINGS CO. LTD. (2181-JP), Meitec Corporation (9744-JP), Teleperformance SE (TEP-FR), Randstad NV (RAND-NL), Adecco Group AG (ADEN-CH), and PageGroup PLC (PAGE-GB). Add exposure.

Our international Human Resources &amp; Employment Services Groups are showing signs of price and RS bottoms throughout Japan, Europe, and the UK. We believe short-term pullbacks in the names highlighted today should be bought, particularly in light of the Fed hinting at increased flexibility and the potential for improving trade headlines. Today we highlight our favorite setups within our int’l HR &amp; Employment Services Groups: Recruit Holdings Co., Ltd. (6098-JP), PERSOL HOLDINGS CO. LTD. (2181-JP), Meitec Corporation (9744-JP), Teleperformance SE (TEP-FR), Randstad NV (RAND-NL), Adecco Group AG (ADEN-CH), and PageGroup PLC (PAGE-GB). Add exposure.

Int’l Human Resources & Employment Services Stocks Are Bottoming -- Add Exposure

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/15070" target="_blank" data-smartkarma-citation="entities:15070:1">Recruit Holdings (6098 JP)</a> (Recruit) reported its full-year financial results for FY03/19 on Tuesday (14th May 2019). The company reported revenue of ¥2,311bn (+6.3% YoY) and EBITDA of ¥293bn (+13.5% YoY) for FY03/19. Both revenue and EBITDA were broadly on par with consensus and our estimates.Recruit’s revenue growth declined to 6.3% YoY in FY03/19 from 11.3% YoY in FY03/18. This was mostly due to the slowdown in overseas staffing activity owing to current political and economic headwinds in the global market. However, domestic recruitment activity continued to remain strong during the year. Recruit’s revenue exposure to overseas labour markets was around 48% of consolidated revenue (in FY03/19), while its exposure to the domestic labour market was around 36% of consolidated revenue.We expect Recruit’s consolidated revenue to increase 6.8% YoY to reach ¥2,468bn in FY03/20E, underpinned by the acceleration of domestic recruitment activity despite the slowdown in overseas labour markets. Our consolidated EBITDA estimate for FY03/20E is ¥319bn, which is at around the mid-point of the guidance range of ¥310-330bn.At a FY1 (FY03/20E) EV/EBITDA multiple of 16.1x, Recruit looks expensive to us compared to both its employment and internet advertising business peers. <a href="https://www.smartkarma.com/entities/1428" target="_blank" data-smartkarma-citation="entities:1428:1">Persol Holdings (2181 JP</a>), the second largest staffing company in Japan after Recruit, is trading at a FY1 EV/EBITDA of 7.4x. <a href="https://www.smartkarma.com/entities/19603" target="_blank" data-smartkarma-citation="entities:19603:1">Yahoo Japan (4689 JP)</a>, which earns around 70% of its EBITDA from advertising related businesses, is trading at a FY1 EV/EBITDA of 6.5x.

Recruit Holdings (6098 JP) (Recruit) reported its full-year financial results for FY03/19 on Tuesday (14th May 2019). The company reported revenue of ¥2,311bn (+6.3% YoY) and EBITDA of ¥293bn (+13.5% YoY) for FY03/19. Both revenue and EBITDA were broadly on par with consensus and our estimates.Recruit’s revenue growth declined to 6.3% YoY in FY03/19 from 11.3% YoY in FY03/18. This was mostly due to the slowdown in overseas staffing activity owing to current political and economic headwinds in the global market. However, domestic recruitment activity continued to remain strong during the year. Recruit’s revenue exposure to overseas labour markets was around 48% of consolidated revenue (in FY03/19), while its exposure to the domestic labour market was around 36% of consolidated revenue.We expect Recruit’s consolidated revenue to increase 6.8% YoY to reach ¥2,468bn in FY03/20E, underpinned by the acceleration of domestic recruitment activity despite the slowdown in overseas labour markets. Our consolidated EBITDA estimate for FY03/20E is ¥319bn, which is at around the mid-point of the guidance range of ¥310-330bn.At a FY1 (FY03/20E) EV/EBITDA multiple of 16.1x, Recruit looks expensive to us compared to both its employment and internet advertising business peers. Persol Holdings (2181 JP), the second largest staffing company in Japan after Recruit, is trading at a FY1 EV/EBITDA of 7.4x. Yahoo Japan (4689 JP), which earns around 70% of its EBITDA from advertising related businesses, is trading at a FY1 EV/EBITDA of 6.5x.

Recruit Holdings: Slowdown in Global Staffing Activity Curtails Growth

Japan

Recruit Holdings Co. Ltd. operates information providing services in human resource, housing, bridal, travel, restaurants, beauty, automobiles, and education and more. The company also operate staffing services and advertising business.

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Recruit Holdings (6098 JP)

Global Equity Strategy U.S. Fed Cut, Now What?

With further consolidation likely for the broad indexes, we want to stick with areas of the market that have shown an ability to outperform despite...

Vermilion Research

🇯🇵 JAPAN • Market Update - Levitating on Thin Air

MOVING AVERAGE BREAKOUT - Japanese equities have now risen by 5.1% since the low of 4th June and, since July 1st, the Total Market Value has...

Campbell Gunn

🇯🇵 Japan • June Relative Price Scores: Market, Sectors & Peer Groups - More of The Same

• RELATIVE PRICE SCORE •The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the...

Campbell Gunn

Int’l Human Resources & Employment Services Stocks Are Bottoming -- Add Exposure

Our international Human Resources & Employment Services Groups are showing signs of price and RS bottoms throughout Japan, Europe, and the...

Vermilion Research

Recruit Holdings: Slowdown in Global Staffing Activity Curtails Growth

Recruit Holdings (6098 JP) (Recruit) reported its full-year financial results for FY03/19 on Tuesday (14th May 2019). The company reported revenue...

Supun Walpola

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